Investors have sold Sh285.8 million worth of East African Breweries Plc (EABL) shares in profit-making trades as Diageo plc has offered to raise its stake in the Nairobi Securities Exchange-listed firm at a price of Sh192 per share.
The multinational announced on October 14 that it would buy an additional 118.3 million shares in EABL through a tender offer.
The move has lifted the brewer’s stock price and created an opportunity for some investors to sell their stake at a profit before the purchase of Diageo will take place over 40 days starting January 30, 2023.
EABL’s share price rose 23.1 percent on the day of the material announcement, compared to the previous closing of Sh138. It has dropped slightly from Friday’s price of Sh167.25. The share price has remained below Sh150 for most days since the start of the year, underscoring the premium of Diageo’s offering and its impact on lifting the stock since the announcement.
Market data shows investors have sold a total of 1.68 million EABL shares since October 14, redeeming Sh285.8 million collectively.
The bulk of the sales, Sh209.9 million, were recorded in the first three days of the announcement. Diageo is expected to sell more shares, the offer of which is still much higher than the prevailing market price.
Some 40.7 million shares of EABL were purchased between the start of the year and the eve of Diageo’s announcement at a cost of Sh5.8 billion, representing an average price of Sh144 per share. The London-listed firm could spend up to $22.7 billion in the tender offer, which aims to increase its stake in EABL to 65 per cent from the current 50.03 per cent.
Diageo’s offering comes at a time when the subsidiary has posted high profitability, leading to a sharp recovery in demand after the lifting of restrictions related to the COVID-19 pandemic.
EABL more than doubled its net income to 15.57 billion for the year ended June, from 6.96 billion a year ago.
Announcing the tender offer, Diageo said, “Diageo’s East African business continues to strengthen and rapidly expand its reach.”
“Furthermore, a resilient and adaptive approach by business through the COVID-19 pandemic coupled with vibrant e-commerce growth has reinforced Diageo’s belief that this is an opportune time to deepen the East African position.”